Confidence or corruption? Assessing the impact of political connections on confidence in public institutions in India

While socio-economic factors affecting households’ confidence in public institutions are documented in the literature, there is a lack of empirical enquiry on whether political connections increase confidence in public institutions and the mechanism through which political connections impact confidence. This study demonstrates the impact of political connections on households’ confidence in three public institutions – panchayat or the local government, politicians and state government. Using two rounds of India Human Development Survey (2004–05 & 2011–12) and employing a Fixed Effects Ordered Logit model, we find that households’ political connections significantly increase their confidence in panchayats when a household member or somebody close to the household is a panchayat official. We explain this relationship by political elite capture wherein households with political connections obtain larger support from the government compared to other households lacking such connections. We also account for the endogeneity of political connections using Lewbel IV method. The policy implications include the need to ensure equal opportunities to all and improving political participation to achieve greater confidence in public institutions.